The Goods and Service Tax, a paradigm shift in the Indian Tax regime was promulgated in 2017. The reform reverberated across all industries with the Indian gaming industry experiencing profound ramifications. Prior to this incorporation, The Gaming industry enjoyed fiscal autonomy, operating with a lenient tax framework. However, the incorporation of new tax regime posed Significant hinderances to the industry’s growth and competitiveness.
As per the PwC India Report, “India’s online gaming industry is estimated to double to INR 66,000 crore by 2028, with the potential to create an additional 2 to 3 lakh jobs in the next few years.”1
The recent introduction of a uniform 28% GST Slab on all online gaming activities, up from 18% for skill- based games, now imposes additional financial strain on the gamers.2 Despite this new rate, India’s gaming market grew by 23% Y-O-Y to $3.8 Billion in FY24.3 Additionally, the Indian gaming market is projected to cross $9.2 billlion by FY29, driven by a five-year CAGR of 20% from FY24.
This blog post examines the impact of India’s Goods and Services Tax (GST) on the online gaming industry, particularly focusing on the recent uniform 28% tax slab. It explores the implications for gamers, businesses, and overall growth, highlighting issues like reduced revenue, compliance burdens, and a shift towards unregulated platforms. The blog also covers alternative tax models, responsible gaming initiatives, and proposed regulatory reforms.
According to a report by ‘Lumikai’, “a gaming-focused venture capital firm, the average weekly time spent on online gaming has jumped by 30%, increasing from 10 hours to 12 hours.”4 Notably, over 44% of gamers are now women, up from 41% the previous year.5 This indicates a more diverse player base, further highlighting rising engagement alongside growing market potential, attracting a broader audience.
While real money gaming continues to be the primary driver of the revenue for the industry, generating approximately $2.4 billion of the total revenue pool. In-app purchase revenue emerged as the fastest-growing segment in FY24; with a year-over-year (YoY) growth of 41%.
The Decision of the Goods and Service Tax Council (GST Council), made during its 50th meeting on 11th July 20236, as outlined in the Central Goods and Service Tax (Third Amendment) Rules, 20237,came into effect from October 1, 2023.The amendment imposes a uniform tax rate on the full-face value of the initial purchases of in-game currency across online gaming platforms, casinos and horse racing, including foreign platforms targeting Indian Players.
However, such a levy is exempted in case of winnings reinvested in the game, Additionally, the tax charged will not be reimbursed in the event of a cash refund.8 The amendment further mandates the foreign platforms rendering services in India to obtain their GST Registration9.
It also provides coverage for taxableBusiness-to-Business (B2B) and Business-to-Government (B2G) transactions involving goods or services, export sales and sales subjected to the Reverse charge Mechanism (RCM).’0
The Hon’ble Court in the case of Gameskraft outlined the guidelines for determining retrospective taxation, which were subsequently endorsed by the Revenue Secretary in a press briefing11.
The Recommendations called for significant amendments regarding “specified actionable claims” to ‘equate online gaming with betting and gambling.’ These reforms were inclusive of special provisions incorporated under, ‘the CGST Act’, following the president’s assent on 31st August 2023. The individual states were responsible for implementing these reforms by the set implementation date of 1st October 2023.12
However, the ramification of this policy has been profound. Many companies have been forced to divert considerable portions of their annual revenues to GST compliance, thereby significantly restricting their growth and innovation potential.’3
In this new tax regime,the base of the taxation has been switched from ‘transaction value’ (platform fee) to ‘deposit’ value in accordance with the ‘valuation provision’ under Rule 31 B of the CGST rules14. These rules specify the computation of supply value to be based on the total funds deposited with the supplier. Following the change in the basis for levying GST, taxpayers’ difficulties assessing the supply value.’5
According to a study by ‘EY’, “the placement of online games in the highest bracket has crippled the industry negatively.”16 The retrospective enforcement of the GST sparked widespread notices to gaming operators, recovering tax dues dating back several years. This ultimately led to slashed prize pools, pushing users towards offshore and unregulated platforms. Such platforms have raised regulatory alarms over money laundering, consumer safety, and fraud. Furthermore, RMG is expected to contract by 20% – 30% in FY25 while the gaming industry’s CAGR is projected at 7% over the next 5 years. Additionally, the gaming sector has witnessed a significant investment downturn, while new funding plummeting to %16 million in 2023 from a historic high of $1.2 billion in 2017. 17
The USISPF survey corroborated these findings, revealing that 58% of gaming companies faced revenue declines post-GST implementation.18
This 28% Levy triggers a 40-50% revenue contraction19 for operators and compels the mass migration of players to unregulated offshore platforms as evidenced by 412% surge in registrations post-implementation (DGGI, 2024).20 Since it’s levied on the total amount deposited, players face exorbitant upfront costs. For example, a ₹1,000 deposit now incurs ₹280 GST, leaving only ₹720 for gameplay, increasing effective entry costs by 38%. Consequently, as player deposits decrease, net return diminishes proportionally, creating a cycle of reduced liquidity and engagement. This risk triggering a 25-30% drop in daily active users due to the 28% GST and 30% TDS burden, eroding player retention metrics.21 Some gamers may also try to choose an offshore platform which is not subjected to GST. In response to unregulated offshore platforms, stricter RMG regulations are likely such as witnessed in the Proposed amendments to IT Act may impose KYC mandates and geo-blocking, increasing compliance costs by 40-60% for operators22
India’s online gaming industry is challenged on multiple fronts: unclear classification of skill versus chance-based games, disputes over prohibitively high tax rates and specifically an influx of illegal betting. Reflecting on this, the October 2024 scientific framework from Professor Bimal Roy and The Dialogue proposes the use of statistical tools (for example, Chi-Square Test)23 to evaluate skill dominance to resolve contradictory judicial definitions such as the Supreme Court’s “Dominant Nature Test” (State of Bombay v. RMD Chamarbaugwala)24 and the decisions endorsing platforms of fantasy sports (Varun Gumber v. UT of Chandigarh).
In 2023, a GST amendment was passed, imposing a 28% tax on the entire deposit value which has led to significant backlash from the industry and remains embroiled in court litigation in various High Courts, seeking differential taxation (18% on Gross Gaming Revenue) in line with jurisdictions such as the UK. Stringent GST taxes and lax KYC implementation pushed customers to unregulated overseas platforms, which has started a two-way conversation between our government with stakeholders for a central regulator (MeitY proposal) and differential tax rate on games of skill and chance to check fraud and ensure parity. Maintaining a balance between unambiguous categorization, even taxation, and stricter enforcement is essential to securing legitimacy for the sector.25
In contrast, other countries have embraced relatively more lenient tax regimes compared to India. While the United Kingdom has imposed a 15% tax on Gross Gaming Revenue (GGE), countries like Portugal and Poland impose taxes on entry amounts ranging between 3-15%. Thus, India’s gaming industry is placed at a disadvantageous position compared to its peers in other jurisdiction on account of India’s taxation rate, which is significantly higher than those of other nations.26 Consequently, our GST game could potentially drive away the gaming companies to relocate.
This sparked intense debate, Aaditya Shah, the Chief Operating Officer at India Plays, warned “the increased tax burden could negatively impact companies cash flows, thereby limiting their ability to invest in innovation, research, and business expansion.”Amrit kiran, Chief Strategy Advisor at Gameskraft labelled it as ‘a death knell for India’s $5B gaming ecosystem’while Jay Bhattacharya, Director General, Federation of Indian Fantasy Sports, FIFS. Highlighted systemic risks, including reduced FDI and talent flight. Conversely, Kunal Savani Partner, Cyril Amarchand Mangaldas argued the policy, “provides regulatory certainty, enabling pan-India compliance and attracting institutional investors.”27
Following this Gaming Associations, including the ‘All India Gaming federation (AIGF)’, ‘the E- Gaming Federation (EGF)’, and ‘the Federation of Indian Fantasy Sports (FIFS)’ have jointly implemented a code of ethics to promote responsible gaming practices. The framework enforces age-gating protocols, robust player data protection strategies, and responsible advertising practices, user-defined spending limits, annual third-party audits to ensure compliance among other provisions.28
The code applies to members of the three industry bodies, termed “operators,” offering online skill-based RMG services in India. It is mandatory for the operators with an annual revenue of Rs 100 crore or more within six months of its signing. However, those below the prescribed threshold have a compliance deadline of 9 months.29
Earlier, in December 2023, “Voluntary Code of Ethics for Online Gaming Intermediaries” drafted bythe Internet and Mobile Association of India (IAMAI),’ co-signed by the same industry federations was established to create a “open, safe, trusted, and accountable online gaming ecosystem” 30
Following this development, most companies, including industry leaders like Dream11 and MPL, have advocated amending the ‘GST valuation mechanism’ to a ‘Gross gaming revenue (i.e., GGR/platform fee)’. Other propose a ‘net deposit model’, where GST is levied on deposits minus withdrawals, to reduce compliance burdens and preserve liquidity.
However, there’s still a dire need to refine GST rules specifically for games of skill and establish a centralized licensing authority for online gaming operators. This would address the confusion caused by different state interpretations and ensure fairness in the industry.
The government must clarify that GST applies solely to platform fees (Gross Gaming Revenue), not to the player deposits. This would reflect the true nature of the industry, where players deposits function as contest liabilities returned to winners, not revenue-generating transactions subjected to taxation.
Furthermore, startups and smaller companies operates in regulatory grey area limiting their growth and preventing India from becoming a global leader in game development and technology exports. Implementing key reforms such as centralizing GST on platform fees, establishing a national regulator, and clarifying skill-based game definitions—would unlock India’s $3B+ gaming market, projected to grow at 30% CAGR, while attracting $2B+ in annual investments by 2026.31
The online gaming industry in India stands at a crucial breakpoint with challenges around high taxation, grey regulatory environment, and emergence of sub, non-regulated platforms offshore. Operators and participants are feeling the squeeze from 28% GST on deposit value, leading to reduced liquidity, less investment, and pushing end users into grey and black markets. So, whilst the operators and platforms of the industry lobby for GGR, rather than deposit taxation, and aimed workshops at fixing the inconsistencies between chance-based and skill-based games the government needs to step up too by targeting an ios – style mission – a one stop authority for fairness, regulation and compliance. Alongside the adoption of responsible gaming practices and refinements to taxation policies, these measures are critical to realizing the sector’s growth potential, which is expected to hit $9.2BN FY29, while securing its sustainability for the long term.
Note:
1 Gaming industry set to double by 2028, fostering economic growth and cultural power: PwC India report, https://www.pwc.in/press-releases/2024/gaming-industry-set-double-2028-fostering-economic-growth-cultural-power-pwc-india-report.html.
2 Press Information Bureau, Government of India, 50th GST Council Meeting: Tax Rates, Appellate Tribunal & Compliance Measures (July 11, 2023), pib.gov.in.
3 Aryaman Gupta, India’s online gaming market grew by 23% in FY24 despite GST burden: Report, BUSINESS REPORT (Feb. 7, 2025), https://mybs.in/2daSPfa.
4 Id.
5 Id.
6 Press Information Bureau, Government of India, 50th GST Council Meeting: Tax Rates, Appellate Tribunal & Compliance Measures (July 11, 2023), pib.gov.in.
7 Notification No. 51/2023-Central Tax, Ministry of Finance, Dept. of Revenue, Central Bd. of Indirect Taxes & Customs (Sept. 29, 2023
8 GST Council Meeting: Can online gaming companies expect some cut from 28% tax limit?, GST Council Meeting: Can online gaming companies e (Sept. 9, 2024), https://www.businesstoday.in/personal-finance/tax/story/gst-council-meeting-can-online-gaming-companies-expect-some-cut-from-28-tax-limit-445037-2024-09-09.
9 New GST Rules for Overseas Online Gaming Companies in India, (Dec. 29, 2023), https://cleartax.in/s/gst-rules-for-overseas-online-gaming-companies.
10 ‘ Id.
11 ” Online gaming sector – Developments in October 2023, Lakshmikumaran & Sridharan Attorneys (Mar. 24, 2025), https://www.lakshmisri.com/newsroom/news-briefings/online-gaming-sector-developments-in-october-2023/.
12 ‘ Id.
13 Vidushpat Singhania,When a Uniform GST Rate on Gaming Companies is Not All Fun and Games, (Jan. 13, 2025), https://www.outlookbusiness.com/columns/when-a-uniform-gst-rate-on-gaming-companies-is-not-all-fun-and-games.
14 Central Goods and Services Tax Rules, Rule 31B, Notification No. 51/2023-Central Tax, Ministry of Finance, Dept of Revenue, Central Bd. of Indirect Taxes & Customs (Sept. 29, 2023).
15 Online gaming sector – Developments in October 2023, Lakshmikumaran & Sridharan Attorneys (Mar. 24, 2025), https://www.lakshmisri.com/newsroom/news-briefings/online-gaming-sector-developments-in-october-2023/.
16 Economic Times,GST on online gaming resulted in 412% more revenue in six months, netted ₹6,909 crore, says Finance Minister Sitharaman, The Economic Times (Sept. 9, 2024), https://economictimes.indiatimes.com/news/economy/finance/gst-on-online-gaming-resulted-in-412-more-revenue-in-six-months-netted-6909-crore-says-finance-minister-sitharaman/articleshow/113198707.cms.
17 Vidushpat Singhania,When a Uniform GST Rate on Gaming Companies is Not All Fun and Games, (Jan. 13, 2025), https://www.outlookbusiness.com/columns/when-a-uniform-gst-rate-on-gaming-companies-is-not-all-fun-and-games.
18 Economic Times, GST on online gaming resulted in 412% more revenue in six months, netted ₹6,909 crore, says Finance Minister Sitharaman, The Economic Times (Sept. 9, 2024), https://economictimes.indiatimes.com/news/economy/finance/gst-on-online-gaming-resulted-in-412-more-revenue-in-six-months-netted-6909-crore-says-finance-minister-sitharaman/articleshow/113198707.cms.
19 Deloitte’s 2023 report; Deloitte, GST on Online Gaming (July 2023).
20 Paromita Gupta,Going in for the Kill: Indian Online Gaming Industry Hit With 28% GST, Entrepreneur (July 12, 2023), https://www.entrepreneur.com/en-in/news-and-trends/going-in-for-the-kill-indian-online-gaming-industry-hit/455674.
21 Id.
22 Proposed Amendments to IT Act: Compliance Cost Analysis (2024), https://aigf.in/[exact-path]; All India
Gaming Federation, Impact of 28% GST on Gaming Operators (Jan. 15, 2024), https://aigf.in/gst-impact-2024.
23 Bimal Roy & The Dialogue, India’s First Scientific Framework for Skill-Based Game Classification 5-7 (Oct. 2024). – Bing, Search https://www.bing.com/search?q=Bimal+Roy+%26+The+Dialogue%2C+India%E2%80%99s+First+Scientific+ Framework+for+Skill-Based+Game+Classification+5-7+(Oct.+2024).&cvid=de7cacc9e0cf4b56b0a5e5b082ab33cb&gs_lcrp=EgRlZGdlKgYIABBFGDkyBggAEEU YOdIBBzYwMWowajmoAgiwAgE&FORM=ANAB01&PC=ASTS.
24 The State of Bombay v. R. M. D. Chamarbaugwala, 1957 AIR 699.
25 EY-USISPF Report: New GST law on skill-based online games, US-India Strategic Partnership Forum (June
21, 2024), https://usispf.org/press-release/ey-usispf-report-impact-of-new-gst-law-on-skill-based-online-games/.
26 Vidushpat Singhania, When a Uniform GST Rate on Gaming Companies is Not All Fun and Games, (Jan. 13, 2025), https://www.outlookbusiness.com/columns/when-a-uniform-gst-rate-on-gaming-companies-is-not-all-fun-and-games.
27 Gamers Tag, Analyzing the Impact: How the 28% GST Reshapes the Online Gaming Industry, (Mar. 12, 2024), https://www.linkedin.com/pulse/taxation-strain-28-gst-toll-indias-online-gaming-landscape-iwymc/.
28 Ishika Gupta,India’s Real-Money Gaming Code of Ethics: What’s New in 2025?, (Mar. 17, 2025), https://www.medianama.com/2025/03/223-indias-real-money-gaming-industry-adopts-new-code-of-ethics-whats-changed/.
29 Id.
30 Id.
31 Roland Landers, Indian online gaming industry needs a uniform legal framework to boost business certainty, (Sept. 12, 2022), https://timesofindia.indiatimes.com/blogs/voices/indian-online-gaming-industry-needs-a-uniform-legal-framework-to-boost-business-certainty/.
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